Retailers shifting digital ad strategies

Major changes in retailers’ use of digital coupons and free standing insert promotions were evident in 2013 and especially pronounced at Walmart, Target and Kroger, according to an extensive analysis conducted by the Marx division of Kantar Media.

Retailers’ overall advertising expenditures were relatively in 2013 when compared to the prior year; however, there were large spikes in digital coupon events and free standing insert (FSI) coupon promotion pages.
 
Digital coupons distributed on retailer websites led the growth with a 39.5% increase, followed by a 25.6% increase in retailer participation in FSI coupon promotion pages. There was also a 12.6% increase in total retailer feature ad pages distributed. Although total retailer advertising remained flat in 2013, Marx’ analysis show Walmart, Kroger and Target had significant increases.
 
“These trends indicate that marketing dollars are increasingly being directed toward programs that communicate specific and easy-to-understand value to the shopper when the shopper is actively making purchase decisions,” said Dan Kitrell, vp of Marx Account Solutions at Kantar Media. “Although retailer TV, radio, internet, and other advertising may include specific price promotion information, it may not reach shoppers when they are seeking or receptive to this information. However, an FSI coupon promotion showing a retailer’s featured price combined with potential coupon savings or a retailer feature ad that mentions a digital coupon available on the retailer’s website are easy to understand and are likely being read by a shopper when they are writing their shopping list for the week.”
 
Significant shifts in advertising and promotion activity were observed among leading retailers across the mass, food, drug and other retail sales channels. For example, Walmart had the greatest levels of actual advertising expenditures and the highest level of participation in retailer FSI promotion pages in 2013, increasing their activity in these areas 32.9% and 30.8% respectively. Walmart further benefitted from a 25.2% increase in digital coupon activity on Walmart.com and a 43.7% increase in retail feature ad pages, according to Marx data. Not to be outdone by Walmart’s heightened level of activity, Target also experienced double digit increases across all four of these tactics in 2013. Target ad expenditures increased 11.1% and a 91.8% increase in FSI promotion pages. Target increased digital coupon activity by 22% and retail feature ad pages rose 10.6%.
 
Interestingly, each of the three leading retailers in the drug channel decreased their advertising activity in 2013. CVS had the greatest decrease in retailer advertising with a 32.2% decline and a 37.3% decline in FSI coupon participation. Ad spending at Walgreens declined by 9.8%, but FSI promotion pages grew by 49.3% and digital coupon events increased 7.2%. Rite Aid was experienced a 45% increase in digital coupon events and FSI pages were up 10.3% while overall advertising dollars fells by 6.5%, less than at Walgreens and CVS, according to Marx data.

“Aggregated annual retailer advertising and promotion trends may not tell the whole story. Retailers compete to win shoppers and trips on a weekly basis,” Kittrell said. “Manufacturers may be able to gain a competitive advantage by aligning their program timing with weeks in which retailers have greater advertising and promotion activity. Higher levels of weekly retailer advertising and promotion may translate into increased retailer share of voice with the shoppers, increased shopper traffic into the stores, and increased dollar sales across departments, categories and brands.”

For that reason, Kittrell contends manufacturers need to understand which departments and categories are being featured in their retailers’ weekly advertising and promotion activity since this will influence where within the store the shopper is more likely to shop. As a result, opportunities may be uncovered for improved promotion effectiveness with in-store merchandising that intercepts the shopper as they navigate the total store. By identifying key weeks and key categories at key retailers, manufacturers can improve their results during key selling seasons, new product introductions, and other retail sales initiatives throughout the year, according to Kitrell.
 
“Additionally, retailers should consider how best to leverage the brand advertising and promotion support that is offered by manufacturers to create purchase intent for the category and their brands. In some cases, retailer activity aligns with a manufacturer’s advertising and promotion support to increase the chances that the shopper will buy the manufacturer’s brand at the retailer’s store,” Kittrell said. “In other cases, a retailer may take advantage of the manufacturer’s advertising and promotion support to drive shoppers into their stores and in front of specific categories, but the retailer may compete for the final purchase decision by promoting a store brand alternative to the manufacturer’s brand.”

Ultimately, how retailer and manufacturer activity aligns — or competes — will have an impact on purchase decisions, retail sales, and promotion effectiveness,” according to Kittrell.